Google Stock Plunges 12%, Joe Carlson Calls Shares Cheap – Alphabet (NASDAQ: GOOGL)

Alphabet Inc. (NASDAQ: GOOGL) shares plunged 12.6% on Thursday, wiping nearly $500 billion from its market value and $23,400 from investors. Joseph Carlson Google Fund.

But Carlson, who runs the stock market analysis platform Qualtrim, isn’t selling. He believes Wall Street is overreacting to slowing search revenues and neglecting an increasingly attractive valuation.

“I have no intention of selling any of it,” Carlson said in a video Thursday.

Carlson calculates that at around $285 a share, Alphabet trades at 18.6 times estimated 2027 earnings and 15.5 times projected 2028 earnings.

These figures exclude volatile investment gains and losses, including the billions in SpaceX investment losses that distorted Alphabet’s latest results.

“I don’t see anything here that should justify a reduction in the price of the stock by 12%,” Carlson said.

Carlson pushes back on AI research fears

Google search revenue growth slowed to 12% in the third quarter, from 17% in the second, raising concerns that AI could undermine its most profitable business.

On CNBC, Deepwater Asset Management Gene Munster dismissed Google’s explanations as “excuses”, warning that search growth could slow further in the December quarter.

Carlson criticized Munster for neglecting management’s explanations for the slowdown in search revenue.

“He didn’t even talk to them,” Carlson said.

Management said exchange rates were the main contributor to slowing search growth. Some advertisers in the Asia-Pacific region were also hit by the end of the EU’s tariff exemption for low-value imports, while World Cup spending increased in the previous quarter.

However, Google has acknowledged that AI mode currently generates less advertising revenue per query than traditional search.

“They are ready to cannibalize this business,” Carlson said.

He believes Google is deliberately steering users toward AI-based search and will improve ad revenue from the new product over time.

Cloud growth comes at a cost

Carlson pointed to Google Cloud, whose revenue jumped 103% to $30.7 billion, with operating margins above 36%.

He noted that Google Cloud CEO Thomas Kurian joined the earnings call for the first time, which he sees as a sign the company wants investors to look beyond research.

He expects the cloud will eventually overtake search as Google’s largest revenue source.

But expansion is expensive. Alphabet spent $51.4 billion on capital expenditures and reported negative free cash flow of $9.1 billion, partly reflecting TPU inventory purchases and a $5.2 billion payment for a European Commission fine in 2018.

Carlson compared Google’s spending with Microsoft Corp. (NASDAQ: MSFT), which it said is expected to remain free cash flow positive through fiscal 2027.

Microsoft generated $18.6 billion in free cash flow last quarter, giving it a $28 billion advantage over Alphabet.

Despite his optimism, Carlson acknowledged that AI concerns could weigh on Google’s stock for a few quarters or even a year.

“I don’t necessarily think there’s a need to rush out and buy Google stock today,” he said.

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